Home Prices Up Faster Than Last Year

So far this year, prices are up by 1.6 per cent on average in the mainland state capitals, according to CoreLogic RP Data's weekly update.

Although annual growth is slower, at 8.6 per cent over the year to last week compared with 10.3 per cent this time last year, the gain in the year so far has eclipsed the 1.2 per cent rise in prices over the same part of last year.

Of the five capitals, price momentum is stronger than this time last year in three, with stronger rises in Sydney and Brisbane and smaller falls in Perth.

Melbourne remains strong, the strongest of the five with a gain of 2.8 per cent so far since in the new year, the same as last year.

Only Adelaide is doing worse this year, with a price drop of 0.9 per cent possibly influenced by fires around Adelaide in early January.

At the same time, the auction clearance rate reported by CoreLogic RP Data is a bit lower this year, at 66.9 per cent, compared with 69.8 per cent at this time in 2014.

The latest reading is still high by historical standards, but typically at this time the clearance rate is a couple of weeks into the pickup after the mid-summer lull.

But the trend remains downward.

That may be the result of buyer resistance to higher prices.

But it could also be related to one or both of some other recent changes in the landscape.

One is the move by the Reserve Bank of Australia (RBA) and Australian Prudential Regulation Authority to stop lending to investors from accelerating.

So far, the action has been confined to APRA waving an admonishing finger at the banks, via a stern letter in early December.

But it may still be having a negative effect, if not on the lenders then on investors anticipating less demand for residential property in the future.

The other is the interest rate cut from the RBA last week, bringing the cash rate to 2.25 per cent, a new historical low, from 2.5 per cent.

That will boost demand for housing (and anything else that looks even vaguely like a financial asset), but the speculation ahead of the RBA board's monetary policy meeting last Tuesday may have delayed decisions by buyers.

December housing finance figures from the Australian Bureau of Statistics on Wednesday may shed some light on this by showing how much cash was primed and ready to head into the market at the end of 2014.